Hook / Thesis
Oscar Health (OSCR) looks like a classic “earnings-timing” opportunity going into 2026. The business is large and recurring - revenues near $3 billion a quarter - but the stock has been punished for swinging underwriting results and headline volatility. That volatility has created a chance to buy a platform with scale, a capital-light balance sheet and visible paths to improved underwriting if key policy and mix dynamics trend the right way.
My trade idea: take a long position around today's trading range with a disciplined stop and staged targets. This is not a low-risk trade; the company has delivered substantial swings in operating income and cash flow across 2025. But the math and policy backdrops make a 2026 margin inflection plausible - and the market appears to be over-discounting that possibility.
What Oscar does - and why the market should care
Oscar is a health insurer offering individual, family and employer plans as well as Medicare Advantage products and virtual care support. The company sells insurance (premium revenue), manages medical claims (benefits costs) and layers technology and care-management services on top. That combo means revenue and margins are tied to three levers investors care about: membership/pricing, medical loss ratio (MLR) / benefits cost, and operating efficiency (SG&A & platform scale).
If Oscar can stabilize its MLR through better pricing, membership mix and utilization management while maintaining revenue scale, underwriting margins can swing materially. Given the size of the revenue base, even modest percentage-point improvements in MLR or SG&A leverage would translate to meaningful dollars and could trigger a re-rating.
Hard numbers - the recent picture
Use the company’s quarterly results to read the trend rather than headlines. Recent reported figures show:
- Revenue: Q1 2025 - $3,046,263,000; Q2 2025 - $2,863,945,000; Q3 2025 - $2,985,984,000. Combined Q1-Q3 2025 revenue ≈ $8.90 billion; annualizing that gives ≈ $11.9 billion of revenue - a material scale for an insurer focused on the individual/MA markets.
- Operating performance swung: Q1 2025 operating income was $297,123,000 (profit), while Q2 and Q3 2025 reported operating losses of $230,483,000 and $129,250,000 respectively. That shows the underwriting line can move hundreds of millions quarter-to-quarter.
- Benefits costs (the core medical expense) ran ≈ $2.75–3.12 billion per quarter through 2025 quarters, and SG&A has been in the $480–535 million range most recently. Q3 2025 operating expenses were $3,115,234,000, with other operating expenses of $2,593,642,000 and SG&A of $521,592,000.
- Profitability: Net income/loss - Q1 2025 net income $275,506,000; Q2 2025 net loss $228,491,000; Q3 2025 net loss $137,484,000. The swing from a large Q1 profit to Q2/Q3 losses is the heart of the stock’s volatility.
- Cash flow and balance sheet: Q1 2025 reported strong operating cash flow ($878,542,000) but Q3 2025 showed negative operating cash flow (-$964,658,000). At Q3 2025 the balance sheet showed assets ≈ $5.746 billion, liabilities ≈ $4.719 billion and equity ≈ $1.024 billion. The company used financing activity partly to buffer cash (~$364,034,000 net financing in Q3).
Put simply: revenue scale is solid, underwriting is volatile, and the balance sheet retains >$1 billion of equity buffer. That combination creates optionality if underwriting steadies.
Valuation framing
The market snapshot shows a last trade price of $17.46. The most recent diluted average share count in Q3 2025 was ~259.273 million shares. Using those two figures gives an implied market capitalization of roughly $4.5 billion (259.273M shares x $17.46 = ≈ $4.53B).
Implied market cap ≈ 259,273,000 shares * $17.46 ≈ $4.53 billionThat valuation discounts material execution risk: at ~4.5x implied revenue (if you annualize ~11.9B revenue from the last three quarters), the stock is not priced for a clean growth story; it is priced for underwriting uncertainty and continued headline volatility. If the company can re-deliver mid-single-digit operating margins on that revenue scale, the multiple could re-rate meaningfully.
Note on peers: comparables in public markets are noisy because Oscar mixes individual/ACA, employer and Medicare Advantage products and also sells a technology-forward model. Use valuation qualitatively: the stock trades like a coverage-of-risk story, not a pure growth roll-up.
Catalysts (what would re-rate the stock)
- Policy clarity around ACA subsidies / premium affordability - any extension or supportive framework reduces membership shock risk and improves pricing leverage (news flow on 11/24/2025 hinted policy moves).
- Evidence of MLR stabilization - one or two quarters where benefits costs fall meaningfully relative to premiums, reversing the recent losses.
- Medicare Advantage enrollment / mix improvement - higher-margin MA membership growth would lift blended margins.
- Improved cash flow from operations - a sustained turn positive after Q3’s negative operating cash flow would shore up balance sheet concerns.
- Material institutional buying or a strategic partnership that signals confidence in the platform or distribution advantages.
Trade plan - actionable entry, stops, targets
Risk-profile: high (insurance underwriting and policy risk). Size the position accordingly and treat this as a position trade (time horizon: 3–12 months) with the intent to add on evidence of MLR improvement.
- Trade direction: Long
- Entry: Accumulate 17.00 - 18.50 (current reference price 17.46). If you miss that window, consider waiting for a pullback toward 15.5–16.0 where recent support existed.
- Stop: 14.50 on a close basis - a break and close below this level invalidates the thesis because it would confirm a deeper re-pricing and likely signal either a policy shock or further earnings weakness.
- Targets:
- Target 1 (near-term): $22.00 - reflects a re-test of the post-peak trading band and a move toward a modest multiple expansion.
- Target 2 (medium-term): $28.00 - implies a stronger underwriting recovery and improved sentiment; this approximates a move toward a 6–7x revenue multiple on an improving margin profile.
- Target 3 (bull case, 12+ months): $35.00 - if Oscar demonstrates sustained underwriting stabilization, MA growth and consistent operating cash flow, a higher multiple is plausible.
- Position management: Trim into strength at each target and only add on confirmed quarter-over-quarter MLR improvements and operating cash flow stabilization.
Risks & counterarguments
- Regulatory/policy risk: Changes to ACA subsidies or Medicare Advantage rules could materially affect membership and pricing. Recent headlines show this is an active variable.
- Underwriting remains volatile: 2025 already showed a swing from +$275M net income (Q1) to combined Q2/Q3 losses >$360M. If cost trends worsen or utilization surprises, losses could persist.
- Institutional sentiment & headline risk: Stake reductions by large holders (noted in news flow) and negative momentum signals can prolong downside even if fundamentals improve slowly.
- Cash flow & financing risk: Q3 2025 operating cash flow was negative (-$964.7M) and the company leaned on financing (net financing ≈ $364.0M in Q3). A continued negative cash flow trend could require dilutive financing or strategic moves that compress equity value.
- Competitive pressure: Bigger incumbents with scale (e.g., Centene, Molina) can react to pricing and enrollment moves; warnings from peers could push expectations lower for the whole cohort.
Counterargument: The market may be right to be cautious. Oscar has shown it can swing material losses quickly, and policy uncertainty is real. If 2026 brings another year of underwriting volatility, the stock likely trades lower. My position is conditional on the probability of a 2026 inflection - if that probability falls, I exit.
What would change my mind
I will be forced to turn negative if any of the following occur: continued sequential deterioration in benefits costs (worse MLR) across two consecutive quarters, sustained operating cash flow deficits without credible financing or corrective action, or material membership losses in Medicare Advantage / ACA markets. Conversely, two consecutive quarters of improved MLR and positive operating cash flow would materially increase conviction and justify adding to the position.
Conclusion
Oscar is a high-volatility, high-optionality name. The business has scale (roughly $3B per quarter in revenue recently) and a balance sheet that still supports runway for execution. The market is pricing in significant risk - implied market cap is roughly $4.5 billion using the most recent share count and price - which leaves room for upside if underwriting stabilizes in 2026.
For risk-tolerant investors who can size the position and use a tight stop, the 17.00–18.50 entry band offers an asymmetric risk/reward: a clear path to re-rating on MLR stabilization and policy clarity, while a disciplined stop below 14.50 limits exposure should the underwriting environment worsen. I’ll be watching the next two quarters closely for signs that the Q1 profit dynamics can be sustained or rebuilt into 2026.
Disclosure: This is a trade idea and not personalized investment advice. Size positions consistent with your risk tolerance and account constraints.